Jan. 21. Fourth quarter 2020 net rose 72 percent at Cornelius-based Aquesta Financial compared to the fourth quarter of 2019.

For the full year ended Dec. 31, 2020 net income rose 21 percent to $5.3 million (96 cents per share) compared to the $4.4 million (82 cents per share) during 2019.

CEO Jim Engel said the strong performance in 2020 occurred despite the uncertainty caused by the COVID-19 pandemic. “Aquesta has succeeded in providing the highest levels of service and value to our customers, communities and shareholders. As we turn the page on 2020, Aquesta looks to maintain our upward momentum and excellent performance into 2021 and beyond,” the Aquesta CEO said.

Key Highlights

• Total loan growth of $139.9 million for the twelve months ended December 31, 2020 or 33.7 percent. Loan growth was primarily due to PPP loans as Aquesta focused resources on helping our communities. The increase in total loan portfolio size related to these PPP loans is expected to be temporary and will decrease as the PPP loans are forgiven and/or paid down. However, organic loan growth was strong in 2020 as the net increase in non-PPP loans was $26.5 million, or 6.4 percent, compared to December 31, 2019.

• Total core deposit growth of $120.8 million for the twelve months ended December 31, 2020 or 32.3 percent. Core deposit growth was due to the large number of new deposit customers brought to Aquesta by PPP loans and organic growth.

• Earnings growth for the twelve months ended December 31, 2020 compared to the twelve months ended December 31, 2019 of $910 thousand or 20.9 percent.

• During the fourth quarter of 2020, paid the eighth annual consecutive cash dividend to shareholders. Adjusted for stock splits, the cash dividend has increased every year.

Solid Balance Sheet Growth

At December 31, 2020, Aquesta’s total assets were $680.2 million compared to $523.0 million at December 31, 2019. Total loans were $555.0 million at December 31, 2020 compared to $415.1 million at December 31, 2019. 2020 loan growth was primarily driven by PPP loans, which totaled $113.4 million as of December 31, 2020. However, organic loan growth was strong in 2020 as the net increase in non-PPP loans was $26.5 million, or 6.4 percent, compared to December 31, 2019. Core deposits were $494.3 million at December 31, 2020 compared to $373.6 million at December 31, 2019.

Asset Quality

Nonperforming assets were at $6.1 million as of December 31, 2020 compared to $1.2 million as of December 31, 2019. Aquesta had $5.7 million in non-accrual loans as of December 31, 2020 compared to $1.2 million as of December 31, 2019. The increase of both nonperforming assets and non-accrual loans is primarily related to a small concentration of customers. Aquesta held Other Real Estate Owned (i.e., “OREO” or foreclosed property) of $382 thousand at the end of the 4th quarter 2020 compared to none at end of the 4th quarter 2019.

Net Interest Income

Net interest income was $19.8 million for the twelve months ended December 31, 2020 compared to $16.6 million for the twelve months ended December 31, 2019. This is an increase of $3.2 million or 19.1%. The increase in net interest income is associated with an increased reliance on lower cost core deposits replacing higher cost funding. Additionally, Aquesta was able to accrete $2.1 million of PPP fees into interest income for PPP loans that were held throughout 2020. Aquesta deferred an additional $2.1 million of PPP fee income which will be recognized in subsequent quarters as PPP loans are forgiven or paid down.

Provision for Loan Losses

The provision for loan losses was $2.0 million for the twelve months ended December 31, 2020 compared to $340 thousand for the twelve months ended December 31, 2019. This is an increase of $1.6 million. The increase is due to the ongoing COVID-19 pandemic and management’s estimation of potential losses in the loan portfolio.

Allowance for Loan and Lease Losses

The ratio of ALLL to total loans is 0.96% as of December 31, 2020. The ratio of ALLL to total loans, excluding PPP loans, is 1.20% as of December 31, 2020. The ratio of ALLL to total loans, excluding PPP loans and balances guaranteed by the SBA, is 1.38% as of December 31, 2020.

Non Interest Income
Non interest income was $2.9 million for the twelve months ended December 31, 2020 compared to $2.8 million for the twelve months ended December 31, 2019.

Non Interest Expense
Non interest expense was $13.9 million for the twelve months ended December 31, 2020 compared to $13.7 million for the twelve months ended December 31, 2019.

Personnel

Personnel expense was at $7.7 million as of December 31, 2020 compared to $8.5 million as of December 31, 2019. The decrease in personnel expense is due to the offsetting of salary related costs with PPP origination fees pursuant to ASC 310-20 stemming from the closing and funding of PPP loans.

Occupancy expense

Occupancy expense increased by $152 thousand for the twelve months ended December 31, 2020 compared to the twelve months ending December 31, 2019. The increase is due to the addition of the Rae Farms branch and the adoption of new lease accounting standards which required the recognition of additional lease expense in 2020.

Other Real Estate Owned

Aquesta had a gain on the sale of OREO of $13 thousand for the twelve months ended December 31, 2020 compared to gain on sale of $18 thousand for the twelve months ended December 31, 2019.